Gosford Co OTQ case
Information relevant to questions 106–110
The carrying amount of Gosford Co’s property, plant and equipment at 30 June 2018 was $620,000
and the tax written down value was $460,000.
The following information relates to the year ended 30 June 2019:
1) At the end of the year the carrying amount of property, plant and equipment was $920,000 and the tax written down value was $540,000. During the year some items were revalued by $180,000. No items had previously required revaluation. In the tax authority in which Gosford Co operates revaluations of assets do not affect the tax base of an asset or taxable profit. Gains due to revaluations are taxable on sale.
2) Gosford Co began development of a new product during the year and capitalised $210,000 in accordance with IAS 38. The expenditure was deducted for tax purposes as it was incurred. No any expenditure had been amortised by the year end.
The corporate income tax rate is 20%. The current tax charge was calculated for the year as $60,000.
106. Gosford Co’s assistant accountant is confused by the term ‘tax base’. What is meant by ‘tax base’?